Many large organizations, such as a transit system, city government, or large manufacturing plant, had their own private telephone networks. As I understand it, these networks were not interconnected with Bell and operated and maintained by the owner. In the 1960s and even 1970s you would see two phones on a desk, a typical Bell 500 set, and then an obviously old AE (Automatic Electric) phone, with a fabric cord, the metalic stripe accents on the handset, etc. I doubt that the owners of such systems paid Bell anything for them, otherwise, they would've interconnected and been more up to date.
I recall an old Bell Telephone employee magazine showing a picture of such a desk with the caption: "This is lost revenue! We [Bell employees] need to encourage businesses to switch from their private networks to our service."
I think in the old days the cost of a large private system, especially when the organization was big enough to have maintainers already on staff, was cheaper than Bell. Bell Telephone service was relatively expensive before WW II.
The Phila public schools had a modest PAX (private automatic exchange) in most schools for internal use within the school. Each classroom had a non-dial phone. When the handset lifted it rang in the school office. The school office phone had a dial. No interconnection to Bell. I suspect such a system required only one SxS switch and a few relays. I understand that system is now gone and now classroom phones have dials, and parents can call a teacher directly, instead of making the teacher come to the school office where the outside line was. (I'd love to know what happened to that gear when replaced.)
If anyone can offer more about such large private networks used in industry, I would appreciate if you'd post it.
In the 1980s the age of the wire plant and switchgear caught up and doomed such old systems. Also, Bell had more attractive rates for distributed Centrex.
[TELECOM Digest Editor's Note: I know that through the 1950-1970 era, Chicago Police had a PAX network (with old, AE type dial phones) everywhere, but a limited number of Bell phones and extensions wired through the old WABash-2-4700 switchboard in their headquarters. Then around 1965 or so, Chicago police were cut into the 312-PIG centrex system out of City Hall. Around 1970, all the old Automatic Electric phones and the PAX thing were totally gone. Then about 1995 the old 312-PIG network was replaced with most city offices staying on 312-744 but police going onto 312-745 I think, and a few other departments going onto 312-746. The system now for City of Chicago internally is dial last five digits (4,5,6) plus the final four digits. PAT]